When an employee commits serious misconduct, the employer's response can have lasting consequences for the individual, the wider team, and the organisation's reputation. Whether dismissal is appropriate or whether alternative measures may be more effective requires careful, case-by-case consideration. Even where dismissal is necessary, employers must still navigate complex issues around references, regulatory reporting, and reputational risk.
Following our recent roundtable, we set out some key points to help employers manage these challenges with clarity and confidence.
1. Dismissal is not the only option – even for serious misconduct
While gross misconduct may justify dismissal, case law shows that dismissal should not be an automatic response, however serious the conduct in question. Employers should assess whether dismissal is a reasonable response, taking into account mitigating factors such as stress, health, or whether the incident was out of character.
2. Consider alternatives to dismissal
In some circumstances, alternatives such as mediation, training, apologies, role changes, or remuneration adjustments may address the issues more proportionately and constructively than dismissal.
3. Every situation is unique
Misconduct cases are nuanced and highly fact specific. Consider the nature of the incident, the employee's track record, behavioural changes and the potential impact on the wider team and culture before deciding on next steps. Senior employees, in particular, are often held to higher standards and may pose greater reputational or regulatory risk, requiring a more visible or robust response.
4. Regulatory reporting obligations vary – know your duties
Reporting obligations for misconduct vary significantly across regulators (e.g. FCA, SRA, Charity Commission, DBS). A complaint alone does not always trigger a duty to report but regulators vary in their approach and some like to be informed as early as possible about the possibility of an issue. In all cases employers should aim for a clear, fact-based understanding of the situation before giving a detailed report.
5. Implications for other stakeholders
Dismissal does not end an employer's obligations. Consider how the misconduct affects the business, or other members of staff, or poses a risk to third parties. Regulatory investigations, reputational impact, and the possibility of legal proceedings against the organisation arising from the individual's misconduct must be taken into consideration. It may be necessary to keep an individual inside the organisation whilst investigations are conducted.
6. Clear and comprehensive processes can help manage reputational risk
In an era of heightened scrutiny — including over private conduct and social media — employers may feel pressure to act quickly. However, regulators and stakeholders are more likely to support a response that is consistent, well-reasoned, and aligned with internal policies. Taking time to investigate and document decisions can protect both the organisation and its leadership.
7. Settlement agreements can help manage exits and reputational risk
Where dismissal is being considered, a settlement agreement can help avoid ongoing disputes and reputational damage. Employers might want to think beyond financial terms and consider including conditions such as training or behavioural commitments, particularly for high-profile individuals or those likely to remain visible in the sector.
8. Communication should be accurate and audience-appropriate
When communicating an exit, timing, audience, and content are critical. Be mindful of privacy, confidentiality and defamation risks and if a settlement agreement is used, ensure that any messaging complies with the agreed terms. Tailor messaging appropriately, consider verbal delivery for sensitive matters, and ensure internal teams are prepared to handle press or stakeholder enquiries.
9. References carry legal risk – consistency is key
Employers owe duties to both the former employee and the recipient. Avoid misleading those who ask for references and making defamatory or negligent statements about the subject of them. If you have a reference policy ensure that it is applied uniformly.
10. Balance accountability with culture and communication
A zero-tolerance approach to certain kinds of misconduct may discourage staff from reporting issues for fear of the consequences for colleagues. A more balanced, thoughtful approach that allows for some clemency or understanding that people are fallible, can create a more positive working environment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
